DtC Report 2019: My Take
Wrapped up with my current issue of Wine Business Monthly magazine was their annual supplement report, 2019 Direct to Consumer Wine Shipping Report 2018 Year in Review, on the state of the Direct to Consumer (DtC) wine business. After getting over my irritation that the magazine was wrapped in a single use, non-recyclable plastic bag, I got to reading.
The report is provided as a collaboration between Sovos and Wines Vines Analytics with data from ShipCompliant. They create an algorithm based on the data from the 9,997 wineries in the United States. Interesting to note is the makeup of United States wineries in 2018:
• 43% produce under 1,000 cases, shipped 17% more, with an average bottle price $72.22
• 37% between 1,000 and 4,999, shipped 7% more, with an average bottle price $55.95
• 16% between 5,000 and 49,999, shipped 8% more, with an average bottle price $42.99
• 3% between 50,000 and 499,999, shipped 3% more, with an average bottle price $33.58, and
• 1% 500,000+, shipped 28% more, with an average bottle price $17.28
This report is always of interest to me since we buy a huge portion of the wines for our cellar via the DtC channel. Especially from vintners in Napa Valley.
The following are a few of the items in this year’s report that I took special interest in:
Spot on:
• DtC is continuing to be a viable and necessary path for many wineries and their customers. The average bottle price of a DtC bottle in 2018 was $39.70, an increase of 2.4% over last year and for bottles costing $100 or more their volume increased 18%.
• Growth of the channel is slowing, due in large part to the fact fewer states are continuing to ban DtC. Last year only one new state, Oklahoma, joined the DtC channel so now only five states do not allow DtC (Utah, Kentucky, Alabama, Mississippi, and Delaware). The report notes these states are relatively small population states so even if they all joined the growth impact would not be hugely significant.
• Shipping compliance will gain in importance. The report forecasts increased federal,, state, and local government scrutiny of the entire DtC chain from producers, fulfillment houses, carriers, to consumers.
• Competition will only continue to grow. For instance between 2011 and 2018 DtC shipments by the largest wineries increased by a whopping 595%.
• Price increases continued with a 2.4% increase in the average price per bottle, but cannot continue unabated. Both the volume and value of DtC wine shipments underperformed the average increases of the past seven years.
• Napa may have reached a ‘pricing plateau’. Napa winery shipments increased only 1.6%, trailing the overall channel. This slowing corresponded to a 7.1% increase in average price-per-bottle, triple the channel as a whole. The report notes this may indicate customers have reached their limit in what they’ll pay for Napa wines. Also interesting to note Sonoma County wineries surpasses Napa County in volume shipped in 2018.
Whoops! There were just two areas where I think the researchers missed the boat:
• …sigh…once again the drum was beaten about the importance of the vast wine-buying potential of Millennials. I thought it quite shortsighted and playing to the mythology that Millennials will ‘save’ the wine industry. If the industry continues to downplay and actually ignore the sweet spot of Gen X wine buyers right now it will be at their own peril and loss.
• The report also hints that the DtC world will be changed thanks to the Tennessee Wine and Spirits Retailers Association vs. Blair case. Interesting point since the majority of articles I read on this topic, by those in the legal profession, argue at most it will have statewide, but not national, impact.
Interestingly … there was no mention of the importance of customer service as a critical aspect of the DtC channel. All I can continue to say is the days of just tossing your wines up online and waiting for them to sell out are long gone. Customer service still matters in all things wine, but especially in retaining your electronic customers!
Cheers and here’s to fine wine on every table!
